Foreclosing On Due Process
The Due Process Clause of the 14th Amendment to the Constitution prohibits state and local governments from depriving persons --individual and corporate-- of life, liberty, or property without certain steps being taken. In this foreclosure mess, donâ€™t default on due process.
Recently some of the largest mortgage servicers such as Bank of America, JPMorgan Chase and GMAC Mortgage have suspended their property foreclosure proceedings in many U.S. states amidst allegations of their failing to follow legal foreclosure procedures. These are some of the same institutions that received a massive federal bailout in the midst of the economic crisis.
America is on pace to top 1.2 million bank foreclosures by the end of this year. According to RealtyTrac “Lenders foreclosed on 95,364 U.S. properties in August, the highest monthly total in the history of the report and about 2 percent higher than the previous peak of 93,777 bank repossessions (REOs) in May 2010.”
Reports indicate that due to this surge in bank foreclosures, mortgage company officials have not been properly reviewing all of the paperwork and in some instances have not been in possession of complete loan packages. One of the major causes of this problem goes back to the genesis of the economic crisis. When a mortgage is resold the seller and new buyer are required to execute a document called an “assignment”. This document provides proof that the transaction actually took place. As these “toxic loans” were being sliced, diced, and resold as valuable parts of other financial instruments, paperwork got lost or was never processed. Now that these toxic loans are in default the mortgage servicers are trying to resell the properties without the “assignment”. In real estate that’s a huge problem.
According to The Washington Post “Lawsuits recently uncovered that a single employee of the GMAC mortgage unit, Jeffrey Stephan, signed off on 10,000 foreclosure papers a month without checking whether the information justified an eviction.” A Bank of America official in Massachusetts has admitted to signing up to 8,000 foreclosure documents a month with out reading them.
As a result of these findings a debate has ensued. Should the freeze on foreclosures continue until such time as mortgage servicers can warrant that all legal processes are being followed? For the sake of the economy, should these institutions be allowed to continue foreclosing on them? Should people facing the possibility of loosing their homes be given their day in court --due process-- or should corporate interests be allowed to seize what for many is their greatest personal asset without following the law?
The companies consider these issues “technicalities” in their court filings and stand by the position that the foreclosures are legitimate. Four law firms processing foreclosures for GMAC in Florida are under investigation for filing claims based upon fabricated or misleading information and documentation.
Those siding with the mortgage companies suggest that this is a “tempest in a teapot”. They argue that there is little if any evidence supporting the claim that people who are current on their mortgages are being mistakenly foreclosed upon. They also argue that delaying the inevitable on most of these homes prevents the clearing of the backlog of homes from the market place, prevents the market from finding its “real bottom” thereby creating a false valuation of the market.
Even the Obama Administration is against a nationwide moratorium on foreclosures. According to CNBC the administration is, “Basically following the same line as the Wall Street Journal editorial page — that the foreclosure crisis is just some meaningless paperwork screw-up — Axelrod emphasized the need to provide certainty to the housing market and to get the foreclosure mills up and running again 'very, very quickly.'"
It is true that even those who are trying to buy property outside of the foreclosure process are finding it difficult to conduct real estate transactions. This foreclosure problem has brought the lending process to a standstill. In an economy that is still in recession, a rebounding housing market would go a long way towards providing much needed economic stimulus and stability.
The simple question is; do you allow established contract law and the law of property to be ignored in order to stimulate the economy? As a former constitutional law professor, President Obama should understand due process better than most. A person should not lose their home without their day in court. Once again, he’s trying to solve a commercial banking problem on the backs of the average consumer.
The fact that many of these financial institutions may have trouble getting these bad loans off of their books and could also be holding properties that’s value has declined further because they can not provide “clear” title is not the consumer's fault. By allowing these mortgage servicers to move these properties outside of the legal process just pushes the problem off on to future home buyers. How can an unsuspecting buyer get the best interest rate without clear title? What about being able to get insurance without clear title? What will happen to the title insurance market?
The Due Process Clause of the 14th Amendment to the Constitution prohibits state and local governments from depriving persons --individual and corporate-- of life, liberty, or property without certain steps being taken. In this foreclosure mess, don’t default on due process.
Columnist Dr. Wilmer Leon is the Producer/ Host of the nationally broadcast call-in talk radio program “Inside the Issues With Wilmer Leon,” and a Lecturer in the Department of Political Science at Howard University in Washington, D.C. Go to www.wilmerleon.com or email: firstname.lastname@example.org.© 2010 InfoWave Communications, LLC.
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